technical report on the nechalacho deposit, thor lake project ...

CASH FLOW ANALYSIS
The cash flow analysis in this <strong>report</strong> is based on the extraction of the Probable Mineral
Reserves in a production plan which extends to the end of year 20.
Pre-Tax
Considering the full project on a stand-alone basis, the undiscounted pre-tax cash flow totals
C$2,091 million over the mine life and simple payback occurs 6.84 years after the start of
production. The IRR is 14.2% and the net present value (NPV) is as follows:
• C$826 million at a 5% discount rate
• C$428 million at an 8% discount rate
• C$246 million at a 10% discount rate
After-Tax
Considering the full project on a stand-alone basis, the undiscounted after-tax cash flow totals
C$1,506 million over the mine life and simple payback occurs 7.25 years after the start of
production. The IRR is 11.8% and the net present value (NPV) is as follows:
• C$540 million at a 5% discount rate
• C$236 million at an 8% discount rate
• C$97 million at a 10% discount rate
The cost per kilogram of product is US$5.93, and the net revenue per kilogram of product is
US$11.91. The average annual product production is 26,000 tonnes, which rises to a maximum
of 32,900 tonnes in year 16.
SENSITIVITY ANALYSIS
Project risks can be identified in both economic and non-economic terms. Key economic risks
were examined by running cash flow sensitivities:
• Product Prices
• Exchange Rate
• Operating costs
• Capital costs
• TREO price
• ZrO 2 price
Technical Report 43-101 – March 13, 2011 Page 18-137
Prepared by Avalon Rare Metals Inc.